What is accumulated depreciation?

The total depreciation expense recognized on an asset since it was placed in service, reported as a contra-asset on the balance sheet. Net book value equals original cost minus accumulated depreciation.

Which depreciation method should I use?

For U.S. financial statements (GAAP), straight-line is the default and most common. For tax purposes, U.S. businesses must use MACRS (Modified Accelerated Cost Recovery System), which accelerates depreciation similar to DDB but with prescribed conventions. Choose the method that matches the asset's actual pattern of economic benefit.

The IRS depreciation system used for U.S. tax filings since 1986. It assigns asset classes (3, 5, 7, 10, 15, 20, 27.5, 39-year) and prescribes depreciation rates per year using a half-year or mid-quarter convention. Specific rates are published in IRS Publication 946.

Can salvage value be zero?

Yes — many assets fully depreciate to zero. MACRS for U.S. tax purposes assumes zero salvage value by convention. For GAAP financial reporting, you can use a non-zero salvage estimate if reasonable.

What is bonus depreciation?

A first-year deduction for qualified property under U.S. tax law. For 2026, bonus depreciation is 40% (phasing down from 100% in 2022 to 0% in 2027 under current law). It applies to most tangible property with a 20-year or less recovery period.

What is Section 179 expensing?

An election to immediately deduct the full cost of qualifying property (up to $1.22 million in 2026, phasing out after $3.05 million in purchases) instead of depreciating it. Best for small businesses with consistent profitability who want immediate tax benefit.

Finance

Accumulated Depreciation Calculator

Calculate accumulated depreciation and book value using three standard methods.

Asset Cost ($)

Salvage Value ($)

Useful Life (years)

Years Elapsed

Depreciation Method

Formulas:
Straight-Line: (Cost − Salvage) / Life per year
DDB: 2/Life × Beginning Book Value
SYD: (Remaining Life / Sum of Years) × Depreciable Base

Depreciation matches the cost of long-lived assets against the periods that benefit from their use. The mechanic is straightforward: pick a method, calculate annual expense, accumulate over time, subtract from cost to get book value. The choice of method materially changes earnings reported in early years and matters for both tax and GAAP financial statements.

Accumulated depreciation in 30 seconds

Accumulated depreciation is a contra-asset account on the balance sheet that grows each period as depreciation expense is recognized on the income statement. The net book value at any point equals original cost minus accumulated depreciation, less any impairment charges.

The three primary methods

Straight-Line (SL): equal depreciation each year. Annual = (Cost − Salvage) ÷ Life. Default for GAAP; preferred for stable-use assets like buildings.
Double-Declining Balance (DDB): front-loaded. Annual = (2 ÷ Life) × Beginning Book Value. Reflects assets that lose value faster early (vehicles, tech).
Sum-of-Years-Digits (SYD): accelerated but smoother than DDB. Sum = n(n+1)/2; Annual = (Remaining Life ÷ Sum) × Depreciable Base.

Walkthrough: $50,000 asset, $5,000 salvage, 10-year life

Depreciable base: $50,000 − $5,000 = $45,000
SL: $4,500/year flat; year 4 accumulated = $18,000; book value = $32,000
DDB: rate 20%; year 1 = $10,000, year 2 = $8,000, year 3 = $6,400, year 4 = $5,120; year 4 accumulated = $29,520; book value = $20,480
SYD: sum = 55; year 1 = $8,182, year 2 = $7,364, year 3 = $6,545, year 4 = $5,727; year 4 accumulated = $27,818; book value = $22,182

The book value spread between SL and DDB at year 4 is $11,520 — a meaningful difference in reported assets and accumulated depreciation expense.

Tax depreciation: MACRS and beyond

For U.S. tax purposes, businesses must use MACRS — the IRS's prescribed system. MACRS assigns each asset class a recovery period:

3-year: tractors, racehorses
5-year: computers, vehicles, office equipment
7-year: office furniture, agricultural machinery
10-year: water transportation equipment, single-purpose agricultural structures
15-year: land improvements, qualified leasehold improvements
27.5-year: residential rental real estate
39-year: nonresidential real property

Two additional accelerators: Section 179 (immediate expensing up to $1.22M in 2026) and bonus depreciation (40% first-year deduction in 2026, phasing to 0% by 2027). Smart businesses combine these to optimize timing of deductions.

Choosing the right method

Buildings, office furniture, stable-use equipment: Straight-line
Vehicles, technology, equipment with heavy first-year use: DDB or SYD for GAAP; MACRS for tax
Natural resources (mines, wells): Units-of-production (not covered by this calculator)
Real estate: Almost always straight-line (required by MACRS for real property)

FAQ

Can I switch depreciation methods?

Mid-life method changes require IRS approval (Form 3115) for tax purposes and disclosure with cumulative-effect adjustments under GAAP. Easier to choose carefully at acquisition.

Is land depreciable?

No — land is considered to have an indefinite useful life. Buildings on land are depreciable; the land itself is not.

What happens when an asset is fully depreciated?

It remains on the books at salvage value until disposed. Continued use does not allow further depreciation; you've already recovered the cost.

How is gain/loss on sale calculated?

Sale price minus net book value (cost − accumulated depreciation) at the date of sale. The result is reported on Form 4797 for U.S. business assets.

Does this calculator handle partial-year depreciation?

The displayed schedule assumes full years. For acquisitions mid-year, multiply year-1 depreciation by the fraction of the year held, or use the IRS half-year convention for tax purposes.

What about leased assets?

Under ASC 842, finance leases are depreciated by the lessee similarly to owned assets. Operating leases are expensed as rent rather than depreciated.

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Sources

Reviewed by Marcus Tan, CPA, on February 25, 2026.